It's a safe bet that a recovery of the Asian market was on the New Year’s wish list of pretty much everybody who has a stake in the duty free retail business

As the Chinese Year of the Rooster gets underway, a major retail tender at Hong Kong international airport scheduled to take place in the second quarter of 2017 is likely to prove a fascinating bellwether of the state of health of a key Asian travel retail location. Will the contest show the region on the mend or is it still being hampered by China’s slowing economy and its anti-corruption campaign?

HKIA’s importance as an Asian duty free liquor hotspot is not to be underestimated. It was the third busiest airport in Asia in 2015 and the eighth busiest worldwide. Over a fifth of passengers are from Mainland China, while 41% are business travellers. On the face of it, 2016 was a pretty good year for the airport. Passenger traffic grew by some 2.5% to exceed 70m, while retail space grew by more than 500sq m in May last year with the opening of the Midfield Concourse, which can handle up to 10m passengers a year.

The wider picture looks much less rosy, however. According to Euromonitor International, the number of Chinese trips to Hong Kong dropped by around 6% in 2016, with visitors put off by the strong Hong Kong dollar (which is pegged to the US dollar) and continuing political unrest. In fact, domestic retail sales in Hong Kong fell by 10% over the first 10 months of 2016 with many analysts arguing the golden era of luxury goods sales on the island is now over.

With a sizeable transit business, HKIA is partly insulated from many of these problems. Hong Kong Airport Authority has said retail sales are outperforming downtown sales, but it’s fair to say trading conditions are very different from when the incumbent duty free liquor and tobacco retailer DFS Group won the contract at the height of the Chinese mainland travel boom in 2011. At that time DFS had to battle 11 other bidders to secure a clean sweep of all three of the HKIA’s major concessions: liquor & tobacco, perfume & cosmetics and general merchandise.

DFS Group’s decision to waive its right to take up a three-year contract extension, thus triggering the upcoming retail tender for liquor & tobacco stores in Terminals 1 and 2, can either be seen as the retailer’s desire to exit Hong Kong entirely or renew the business on more favourable rental terms. My guess is the latter given Hong Kong’s regional strategic importance and the airport’s long-term growth plans.

Certainly, DFS seems to be committed to its HKIA business. Last month the retailer opened the Whiskey House at the airport in partnership with William Grant & Sons. The new Departures East Hall concept showcases more than 250 whiskies from around 50 brands. As many as 40 whiskies are available for sampling each day with all the staff there being WSET-trained.

A rolling in-store calendar of events includes blind tastings led by brand ambassadors and ‘meet the expert’ sessions. Competitions also offer the chance to win prizes for ‘liking’ on Facebook and ‘following’ on Instagram.

The introduction of such a high-end concept underlines the potential HKIA has as a venue for single malt whisky, but whether DFS Group retains this retail contract is set to be one of the most interesting Asian duty free stories of the year.